According to the Fifth Amendment of the U.S. Constitution and Article I, Section 17 of the Texas Constitution, applications of the eminent-domain power must be for public use. Jurisdictions have developed legal and administrative structures which allow private interests limited uses of the power. For Texas pipelines, the granting of eminent-domain authority can only take place when a project fulfills certain requirements. Chief among these is the ability to prove that the pipeline has a public use, meaning it is not being built exclusively for and used only by the entity condemning the land. Statewide, the common-carrier definition, and the derivative test determining whether the definition can describe a given pipeline, is used to establish and enforce the public use requirement.

In the recently decided Denbury Green Pipeline – Texas, LLC v. Texas Rice Land Partners, Ltd., the Texas Supreme Court clarified the access conditions for common-carrier status. In 2015, an appellate court established two additional barriers to common-carrier status. First, it held that a pipeline’s common carrier status must result from an examination of the intent of the constructing party to use the pipeline for public benefit at the onset of the project’s contemplation. Second, the pipeline’s use must serve a “substantial” public interest. The Supreme Court decision reversed these two holdings, the first on the grounds that it misinterpreted case law, and the second because it proceeded beyond the limits of precedent. The Supreme Court also held that Denbury’s post-construction product transportation contracts with third parties, and the fact that certain third parties would retain product title, was sufficient to evidence public use and therefore common-carrier status after the pipeline is built. This opinion is a significant blow to Texas landowner rights.

He and the church have helped congregants through drug addictions and gang violence, establishing a youth center and food pantry as part of the church’s mission, but they may have encountered a problem they cannot overcome: the power of eminent domain.

Bishop Roy Lee Kossie has been preaching at Latter Day Deliverance Revival Church in Houston’s Fifth Ward for 50 years, starting his work in 1965 when the area had gained notoriety as one of the city’s most dangerous neighborhoods.

At that time, the Fifth Ward became known as the “Bloody Nickel.” But, decades before the spur of its neighborhood violence, locals simply called it the “Nickel.” The neighborhood had served as a hub for minority-owned businesses and development during an era of redlining and de facto segregation. Congressman Mickey Leland and Congresswoman Barbara Jordan are products of the Fifth Ward, both attending Phillis Wheatley High School on Lyons Avenue, one of the nation’s largest black schools before desegregation.

The neighborhood, once flourishing with the hustle-and-bustle of local businesses, began to change in the 60s, according to the Texas State Historical Association, when upwardly mobile residents moved out to seek broader opportunities that stemmed from integration. Some attribute the neighborhood’s economic and social fall to Highway 59’s exclusion of Lyons Avenue and Jensen Drive – two of the Fifth’s busiest streets at the time – as exits on the major roadway, according to Houston History Magazine.

“The decline was slow,” Patricia Pando wrote in the Houston History Magazine. “Businesses did not disappear overnight. Nevertheless, by the late 1960s, the Lyons Avenue and Jensen Drive intersection was all but abandoned except for the still booming nightclub activity.”

The area’s decline did not, however, scare Bishop Kossie away from his church on Lyons Avenue. The church worked to acquire property, including the lots of two neighboring nightclubs, for its ministry.

“People shot first and asked questions later,” he said in a news release from the Liberty Institute. “But, we love this community. This is where the Lord called us and this is where we want to stay.”

He and the church have helped congregants through drug addictions and gang violence, establishing a youth center and food pantry as part of the church’s mission, but they may have encountered a problem they cannot overcome: the power of eminent domain.

The Houston Housing Authority (“HHA”) has made offers to purchase three of the church’s properties and has threatened to use eminent domain if those offers are not accepted, according to a lawsuit filed August 3 by Latter Day Deliverance Revival Church (“Latter Day”) and Christian Fellowship Missionary Baptist Church (“Christian Fellowship”). Liberty Institute is representing the churches and stated that the HHA was also seeking property owned by Christian Fellowship, a church that has been in the neighborhood for nearly 40 years.

The two churches in Houston’s Fifth Ward assert that the HHA’s use of eminent domain for a redevelopment project infringes upon the churches’ right to practice religion freely as the entity is seeking to take an “undeveloped” plot that Latter Day currently uses for parking and for its outdoor ministry in addition to other properties owned by the churches.

Members from Latter Day Deliverance Revival Church and Christian Fellowship Missionary Baptist Church join together in prayer. Photo courtesy of the Liberty Institute.

The HHA was seeking a total of four parcels from the two churches, three from Latter Day and one from Christian Fellowship, according to the Houston Chronicle. Christian Fellowship resides on one of those parcels, and the HHA planned to demolish the church to build a library, according to a lawyer for the Liberty Institute quoted in the Houston Chronicle Aug. 4.

The HHA initiated a redevelopment project in the Houston neighborhood in partnership with the Fifth Ward Community Redevelopment Corporation (“FWCRC”), an organization dedicated to revitalizing the historic Houston neighborhood through various development projects. The project, however, has come under public scrutiny since the lawsuit was filed. The HHA and the FWCRC altered their initial plan in response to the criticism, and their new plan would allow Pastor Quinton Smith to continue his 20-year career at Christian Fellowship.

“Toward ensuring [Pastor Smith’s] congregation continues its important presence in this community, I have asked our authority’s president, Tory Gunsolley, to work with our consultants to create an alternate development plan that does not include the property of First Christian Fellowship Missionary Baptist Church,” Chairman of the Houston Housing Authority Board of Commissioners Lance Gilliam said. “Unfortunately, that alternate plan will not allow us to include a new library. We recognize, however, that this sacrifice is balanced by the very real impact Pastor Smith and his congregation will have on the lives of existing and future residents of the Fifth Ward.”

Despite this alteration, the HHA and the FWCRC still plan to acquire Latter Day’s property to build a private health clinic.

“Although I applaud Bishop Kossie’s and his congregation’s impact on the quality of life in the Fifth Ward, I cannot provide him any comfort regarding our disagreement,” Gusnolley said.

The court has granted the churches a temporary restraining order to keep the housing authority off their properties but has not yet decided on whether the potential HHA taking violates the Texas Religious Freedom Restoration Act.

The HHA and the FWCRC may have noble intentions for the Fifth Ward as the FWCRC has a history of involvement in the community that includes the building of more than 300 homes in an effort to revitalize the Nickel. But, if we have learned anything since Kelo, it is that economic growth and development should not be cause enough to infringe upon someone’s constitutionally-protected property rights. Latter Day purchased its parcels of land with a vision in mind, and the HHA should not come between the church and that vision without having a compelling reason vested in the public interest to do so.

Co-authored by Justin Hodge and Ayla Syed.

If you have any questions about this blog, please feel free to contact Justin Hodge (jhodge@jmehlaw.com).

As Texas’ 84th Legislative Regular Session closed on June 1, several bills pertinent to eminent-domain reform were sent to the political junkyard where other legislative “almosts” and “could-have-beens” also reside.

Photo depiction of School House Rock cartoon

R.I.P. SB 1601, 474 and 479

Senate Bill 1601, which would have excluded high-speed rail from using eminent domain and thwarted the development of the Texas Central High-Speed Railway between Dallas and Houston, never made it out of the Senate Transportation Committee. The bill was initiated by Senator Lois Kolkhorst, R – Brenham, who filed it with the Texas Senate on March 12 this year in order to better control the use of eminent domain by private companies. To read more about this bill, please read our blog.

Senator Kolkhorst also initiated Senate Bill 474, which died in the Texas House of Representatives after passing through the Senate by a 25-6 vote. In an effort to encourage fair initial offers, the bill would have required those seeking to acquire property to reimburse landowners for their attorneys’ fees if a panel of special commissioners, judge or jury determined the value of the land to be at least 20 percent higher than the amount offered by the condemnor during a condemnation proceeding. The bill initially required compensation only if the value exceeded the offer by at least 10 percent, but that number was changed to 20 percent in the Senate Committee on State Affairs. The House Land and Resource Management Committee left the bill pending. To read more about SB 474, please read our blog.

Senate Bill 479 faced a fate similar to SB 474’s as it made its way out of the Senate in a 29-1 vote only to be left perpetually pending in the House Business and Industry Committee. The bill, authored by Senator Charles Schwertner, R – Georgetown, would have more narrowly defined the phrase “actual progress.” In Texas, a landowner can repurchase his or her land if the condemning party has not made “actual progress” toward the intended use of the property within 10 years of the taking. “Actual progress,” however, can be difficult to define, and SB 479 would have helped remediate that ambiguity. To read more about SB 479, please read our blog.

Co-authored by Justin Hodge and Ayla Syed.

If you have any questions about this post, please feel free to contact Justin Hodge at jhodge@jmehlaw.com

The anticipated high-speed passenger rail line that would travel between Houston and Dallas may not come to fruition if the Texas Senate passes a bill proposed to limit the eminent-domain powers of companies that own such lines.

Photo by Toshiyuki Aizawa/Bloomberg. Texas Central High-Speed Railway plans to purchase trains, similar to the Shinkansen bullet train pictured here, from Central Japan Railway Company for its $12-billion, high-speed rail line that would run between Houston and Dallas.

The proposed bill, initiated by Senator Lois Kolkhorst, R – Brenham, defines a high-speed rails as an “intercity passenger rail service that is reasonably expected to reach speeds of at least 110 miles per hour” and excludes companies that own such rail systems from exercising the power of eminent domain for those projects. The Texas Senate Transportation Committee voted Senate Bill 1601 out of committee on April 8, according to The Texas Tribune.

Texas Central High-Speed Railway, the private company developing the $12 billion train line, has maintained that it has private funding for the entirety of the project and would be able to compensate landowners for the property needed to complete the project more than the government typically can during condemnation.

“We have the ability to pay more because it’s not taxpayer dollars,” Texas Central President Robert Eckels said. “We, in fact, can pay more as a private company and expect that we will be paying more.”

Proponents of the proposed bill argue that the private company should not have the authority to use eminent domain for its own profits.

“Eminent domain is probably the most horrific power that the government has, and to dole that out to individual companies that can misuse that or use it for projects that result in profits, we have to be very careful about doing that,” said Senator Bob Hall, R – Edgewood.

Representatives of Texas Central, however, feel that the company is being singled out as hundreds of private firms are currently authorized to use eminent domain in Texas, according to the Texas Tribune.

“All that we ask is that this train be treated like any other private train in Texas,” said Richard Lawless, Texas Central chairman and CEO. “It does not seem fair to us that this train should be prohibited in Texas just because it goes faster than other trains.”

While the state government may not authorize the use of eminent domain to develop this project, Texas Central has proposed its route to the Federal Railroad Administration.

“Quite honestly, I’d rather do this as a Texas project,” Eckels said.

The train is expected to travel to Dallas from Houston in less than 90 minutes, making one stop in College Station. The company hopes to complete the project by 2021, but a few legislative road blocks may slow its progress.

A photo of the Texas Senate Chambers, where Justin Hodge and Luke Ellis testified on March 9, 2015.

Johns Marrs Ellis & Hodge, LLP, partners Justin Hodge and Luke Ellis testified in front of the Texas Senate Committee on State Affairs on March 9, 2015, in favor of a bill that would better protect landowners in eminent domain proceedings and help ensure that the fear of legal fees would not prevent landowners from seeking just compensation for their property.

Senate Bill 474, proposed by Senator Lois Kolkhorst, R — Brenham, would require those seeking to acquire property to reimburse landowners for their attorney’s fees if the award by the special commissioners exceeds the condemnor’s offer for the property prior to the proceedings by at least 10 percent.* The bill would also require reimbursement of attorney’s fees if the case moves beyond the special commissioners’ hearing to court and the award exceeds the condemnor’s offer prior to the proceeding by at least 10 percent.

Luke Ellis

Ellis and Hodge were the first among the five individuals
invited to testify in front of the Texas Senate Committee on State Affairs. Ellis opened the testimonies by describing a situation in which a landowner purchases a piece of land for $300,000. The landowner then builds a home on the land and spends $200,000 on construction, bringing the landowner’s total cost to $500,000.

An entity wants to use that land for a project that would serve some public purpose, and that entity offers the landowner $300,000. The landowner, knowing the amount he or she has spent on the property, then seeks legal counsel from an attorney. The attorney fights the case for a period of one to four years, at the end of which a jury awards the landowner $500,000.

“Has that landowner recovered in full for the benefit that [his or her] land has provided to our entire community?” Ellis asked the committee after setting up his example. “The answer, under the Texas system as it exists today, is a very definitive no.”

Ellis stated that the landowner does not recover in full in this process because of the attorney’s fees and legal costs required to combat low offers in court, especially when the landowner has to pay for experts and appraisals to counter the condemnor’s experts and appraisals. Ellis then went on to read the language in both the 5th Amendment of the U.S. Constitution that requires condemning authorities to give landowners just compensation for their properties and Article 1, Section 17 of the Texas Constitution that requires adequate compensation.

“But, in Texas, as the system exists, you don’t get just compensation or adequate compensation,” Ellis said. “You get adequate compensation less the cost it takes you to achieve adequate compensation, and that’s not a fair system for Texas landowners.”

This graphic is not representative of every path a condemnation case can follow and does not in any way offer legal advice. This graphic simply presents a the number of paths a hypothetical case could follow in context of SB 474.

The debate on SB 474 centers on whether the bill would have a fiscal impact on the government and increase the cost of condemnation. When presenting her bill, Senator Kolkhorst stated that the bill would not significantly increase costs to the government, and Ellis agreed with this in his testimony. Ellis said this bill would decrease litigation as it would incentivize condemning authorities to make a fair offer that landowners would want to accept initially.

“Condemnors have absolutely no incentive to treat landowners fairly. They’re a business. There is no penalty to make low offers to start,” Ellis said of the current system, adding that condemning entities often make low offers to “wash away” those afraid of a legal battle.

Ellis also described the abuse of power that often occurs in these legal battles as condemnors who can afford to run up legal costs and/or expert fees often do so to tire the landowner’s financial resources and ability to fight low offers.

“We believe [SB 474] is the first and a very strong step in trying to balance the scale,” Ellis said.

Justin Hodge

Hodge also testified and gave a personal testimony of his family’s experience in an eminent-domain proceeding. His family owned a ranch near the Bell-Williamson county line, and his grandfather had spent his lifetime drilling more than 70 water wells on that ranch looking for water to feed their livestock.

Hodge’s grandfather passed away, and Hodge’s father found seven commercial-grade water wells on the property. Hodge’s family contracted with local communities to make use of those water wells until the State of Texas, through the Department of Transportation (“TxDOT”), decided to build a safety rest stop on the ranch in 2006.

“They wanted 28 acres, and, in fact, they were taking the property where six of those seven commercial water wells existed,” Hodge said. “That was a shock to us. We begged and pleaded with TxDOT to move the safety rest stop.”

TxDOT did not move the location of the rest stop. Hodge’s family fought the state’s $350,000 offer for six years. The state did not include any compensation for the water underneath their property in its offer and argued that the water underneath the property did not belong to the landowners, a position that Hodge said ran contrary to nearly a century of case law in Texas.

The Hodge family case went in front of a jury of six people in Bell County, who awarded the family $5.8 million as just compensation for their loss of the water and land.

“You’re probably asking, ‘Well, aren’t you made whole? Isn’t your family made whole in that situation?’ And, the answer is no,” Hodge said to the committee. “We had to pay, as a family, more than $2 million in attorney fees to get that $5.8 million, and that doesn’t include expert costs associated with [the legal battle]. That was money my grandfather had worked hard for to pay for college educations for his great grandchildren, my father’s grandchildren, and my children.”

“This is a bill that will help landowners like my family, landowners…who have to bear a huge cost for the community” Hodge added. “[SB 474] stops abuse.”

Senator Kolkhorst modeled the bill after similar bills in effect in other states in an effort to help stop this abuse.

“The spirit of SB 474 is just to say, if you need to, you can access the courts,” Kolkhorst said. “And, if you were wronged, those fees will be paid by those who wronged you.”

SB 474 is currently pending in the Texas Senate Committee on State Affairs. If passed as currently written, the bill would go in effect September of 2015.

*In Texas, if a landowner and the condemning authority cannot agree to an amount for the property, a panel of three court-appointed special commissioners will determine an award for the property. If either party objects to the award, the case then proceeds to a court where a judge or jury determines the fair-market value of the property in question.

If you want to hear Ellis and Hodge’s testimonies, please visit http://youtu.be/H9psHmXLexw. If you have any questions about SB 474, please feel free to contact Justin Hodge at jhodge@jmehlaw.com.

The Texas Railroad Commission’s (RRC) new pipeline permitting rules that require oil companies to verify their common-carrier status went into effect last week, marking a significant move away from the previous rules that simply required companies to check a box to claim common-carrier status.

The RRC has maintained that its T-4 permit only allows a company to operate a pipeline and does not automatically entrust the company with the power of eminent domain. The limit of this power, the RRC says, remains with the court as it always has.

The new rules will require up-front proof of common-carrier status. Pipeline companies previously only offered proof that they carried unaffiliated third-party product if and when its common-carrier status was challenged.

This rule change comes after the landmark 2012 case in which the Texas Supreme Court ruled that a pipeline company must do more than show its T-4 permit as proof of its common-carrier status. (Texas Rice Land Partners, Ltd. v. Denbury Green-Texas, LLC, 363 S.W.3d 192 (Tex. 2012)).

If you have any questions about the new rules or anything related to eminent domain, please feel free to contact Justin Hodge (jhodge@jmehlaw.com).

Governor Greg Abbott made public roads a focal point during his first State of the State Address earlier this week and included it as the third of five emergency items Texas will tackle this year.

Photo courtesy of the Texas Tribune. Governor Abbott delivered his first State of the State Address on February 17, 2015.

The new governor’s budget includes an additional $4 billion for Texas roads. The governor attributed this increase in budget to funding from Proposition 1 (read more here), the current State Highway Fund, and the reallocation of half of the state’s new and used vehicle sales taxes outlined in Senate Bill 5 (read more here).

As evident from the governor’s State of the State Address, transportation will remain at the forefront of politics this year. The Texas Department of Transportation (TxDOT) has a number of projects already in motion already and announced a list of potential projects earlier this year (read more here).

One of the projects picking up speed right now is the Aggie Expressway, expected to be completed within the next few years. This project will extend State Highway 249 from Houston to Navasota, where it will connect to Highway 6 in Grimes County. The expressway could also require up to nearly 600 acres of right-of-way acquisitions.

Photo courtesy of KBTX.com. This project will help connect Houston to Navasota and reduce travel time to College Station from Houston.

While a less congested path to Aggieland, or College Station, will certainly help fans commuting on game days, this path will come at a cost to many local land owners.

If you have any questions regarding this or any other road projects, please feel free to contact Justin Hodge (jhodge@jmehlaw.com).To read Abbott’s full Address, click here.

A big move by Texas legislators could potentially funnel $25 billion over the span of a decade to the State Highway Fund – the second headline-making highway funding plan proposed this year.

Texas Senator Robert Nichols, R – Jacksonville, filed two pieces of legislation, Senate Bill 5 and its complementary constitutional amendment, Wednesday that could potentially move a portion of funds raised from new and used vehicle sales tax to the State Highway Fund.

Nichols serves as the chairman of the Senate Transportation Committee, and the bills were co-authored by Senator Jane Nelson, R – Flower Mound, the chairwoman of the Senate Finance Committee.

If approved by the State Legislature, the legislation would appear on the November ballot for voter approval and follow a path to implementation similar to Proposition 1 (Read our post on Proposition 1 here).

Additional highway funding would give TxDOT more leeway to expand and build upon current infrastructure and also allow it to finance new roadway projects. These projects often include condemnation proceedings to acquire land needed for expansion from current landowners. As Texas’ transportation infrastructure continues to expand, eminent domain will stay at the forefront of legal battles produced by new projects.

*Post title modified from “Proud Mary,” a song made popular by Tina Turner.

The Texas Department of Transportation (TxDOT) announced a list of potential projects last week that would utilize funds from the Texas Transportation Funding Amendment (also known as “Proposition 1”), which passed with 80% of the votes during the November elections.

Proposition 1 is projected to funnel about $1.74 billion to TxDOT projects from oil and gas tax revenues, money that previously went solely to the state’s “Rainy Day Fund.” Half of these revenues will continue going toward the Rainy Day Fund, but the other half will now help finance road projects.

TxDOT has allocated about $150 million of Proposition 1 funds to Austin, most of which will likely go toward expanding I-35, one of the nation’s most congested highways, by two lanes. TxDOT also earmarked $278 million for projects in Houston, and part of those funds could potentially help expand US-59 to a 6-lane highway.

Texas, especially areas in Houston and Austin, has seen some of the highest rates of population growth in the nation in recent years, and this growth comes hand-and-hand with expansion.

A Texas-based oil company discovered a leak in one of its pipelines in North Dakota after a local farmer reported it to ND officials on Sept. 29, but the oil company did not spill this news until 11 days after discovering the pipeline rupture that released an estimated more-than 20,000 barrels of crude oil.

State officials initially reported a 750-barrel spill that the company in question, Tesoro Logistics LP, did not publicize because of the smaller initial estimate and what it considered to be a lack of environmental damage.

Kris Roberts, an environmental geologist with the North Dakota Health Department, was quoted in a New York Times article stating that Tesoro officials reported the spill to the state within 24 hours of first discovery and that the state does not have to release information of all oil spills publicly.

While Tesoro responded to the spill promptly, the cleanup process could take a couple of years and will cost an estimated $4 million. The local wheat farmer, Steve Jensen, who notified the State Department of Health of the oil spill after seeing crude oil coating the wheels of his combine, will also receive compensation for damages to his field that could keep his wheat crops out for a couple of years. He and Tesoro are negotiating a settlement in regards to this matter.

The spill seems to have originated from a hole — about a quarter-inch in diameter — in a segment of the 20-year-old pipeline originally built by BP in 1993 but purchased by Tesoro in 2001, according to Reuters. The pipeline runs 35 miles within the state.

Many people have criticized Tesoro for not detecting the spill of about 20,600 gallons over 7.3 acres, or the equivalent of seven football fields according to the NYT, and the spill comes during an oil boom for the state following its 1951 discovery of oil. This spill surely will not help mitigate those concerned about the much larger Keystone XL pipeline expansion that will cross international borders and include 1,700 new miles of pipeline if approved. The Keystone Pipeline did not see its day in Congress during the debt-ceiling debates, and a decision on its expansion will likely not come until 2014.

TransCanada, the company heading the Keystone project, Tesoro Corp. and other pipeline owners cannot afford to slack on detecting leaks under the current political climate. These companies must employ vigilance and preemptive measures to mitigate environmental concerns and to protect landowners like Jensen whose income depends on the land surrounding oil pipelines.

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Luke Ellis and Justin Hodge are partners with Marrs Ellis & Hodge LLP. Justin heads the firm's eminent domain practice in the Houston office. Luke heads the firm's eminent domain practice in the Austin office. Luke Ellis is widely recognized as one of Texas’s top young lawyers—and one of the top lawyers of any age practicing in the area of eminent domain. Mr. Ellis has broad experience and has enjoyed success in many types of civil litigation. Justin Hodge is a trial lawyer who represents Texas landowners in condemnation, eminent-domain, and real-estate lawsuits. He represents landowners in condemnation proceedings, not the governmental authorities or private companies taking property. Mr. Hodge has handled complex condemnation and eminent-domain cases throughout the State of Texas.
If you have questions about any of the issues raised in this blog, we invite you to discuss them with us at jhodge@mehlaw.com or lellis@mehlaw.com.